The controversy surrounding the announcement of US mobile operator T-Mobile’s unlimited data bundle in mid-August could have lessons for other operators considering taking the same path.
The proposed plan, called T-Mobile One, has been criticised by campaigners such as the EFF for violating net neutrality rules.
A key tenet of the new package is that customers who use the unlimited plans extensively may find that their speeds are degraded, however.
“The highest 3% (currently those using more than 26GB of high-speed data/month) may see their data traffic prioritized behind other users once they cross that threshold during their billing month,” says the FAQ on T-Mobile’s website.
The company said that these customers might experience relatively slower speeds at times and places that might have network congestion.
The Electronic Frontier Foundation told the Daily Dot that this could amount to breaching US net neutrality rules. In February, the Federal Communications Commission passed rules that prevent ISPs from reducing speeds for higher data consumers.
FCC’s Open Internet rules specifically bar companies from blocking, throttling, and engaging in paid prioritisation.
The rules read: “A person engaged in the provision of broadband internet access service, insofar as such person is so engaged, shall not impair or degrade lawful internet traffic on the basis of internet content, application, or service, or use of a non-harmful device, subject to reasonable network management.”
T-Mobile’s approach shows one way that carriers might try to boost margins on unlimited plans. The price competition is considerable. Almost simultaneously with T-Mobile, Sprint launched an unlimited plan costing $60 a month for one line and $100 for two.
In the UK, Three is unique among the big four mobile providers in offering an effectively unlimited 4G data plan.
Until March 2014 "All-you-can-eat" data used to cost £17 per month. Three discontinued that plan and in February 2016 announced it would move all of these customers onto a £30 per month plan.
The service is not ‘throttled’ in any way, but the increase in the price in the first place shows that earlier unlimited plans are becoming unviable.
There do not appear to be plans for the other major mobile operators to offer permanently unlimited data plans.
The huge uptick in the amount of video consumed by the average person has driven up data consumption hugely. According to Ericsson’s Mobility Report, data traffic grew 60 percent between Q1 2015 and Q1 2016. Total mobile data traffic is expected to rise at a compound annual growth rate (CAGR) of around 45 percent.
With this data usage set to continue to grow faster than the bandwidth available, the unlimited data plan is likely to get less economical rather than more so.
The high number of players in the mobile markets in Europe also means that the pressure on prices is down rather than up.
Kester Mann, Principal Analyst at CCS Insight, says that the main reason for the low prevalence of unlimited data plans in Europe is concern over strain on mobile networks.
“In the UK for example, we have already seen Three significantly pull back from this strategy over the last few quarters. It seems hard to comprehend the economics working and I think that many operators are reluctant to offer it these days.”
He said that he would expect mobile operators to “push the boundaries” around net neutrality but that regulation could curtail their plans.
Do people want unlimited data anyway? Stuart Wilson, head of sales and marketing at Talkmobile, cites figures based on an analysis of 0.5million Talkmobile customers showing that over 90 percent of unlimited customers use less than 5GB of data.
He says that the majority of customers would save money by being on plans with a defined allowance.
“People buy these plans to meet an emotional need based around fear of out of bundle charges. In practice, it’s been known for operators to protect their risk by throttling speed or introducing fair use policies.”
If unlimited data plans currently pose issues to operators, it is not certain that they will always be unviable.
New technologies could alter the economics of such plans in the future. For example, the next generation of mobile technology, 5G, may move a lot of traffic to the less used lower bandwidths, reducing congestion.
In addition, the availability of wi-fi is set to increase hugely in coming years. Wi-fi is better at reaching indoor areas, for example, and is a more economical way of transporting large amounts of data.
If mobile operators can seamlessly switch users from cellular networks to wi-fi and back again, unlimited plans may once again become a lot more feasible.
